FY26 gross FDI at record $95 bn, but net inflows only $7.7 bn: RBI data, Pg18

Key Highlights:

• India's gross Foreign Direct Investment (FDI) reached a record high of $94.53 billion in FY26, a 17% increase from the previous year.
• Net FDI, however, was significantly lower at $7.65 billion due to increased repatriation by foreign investors and overseas investments by Indian companies.
• Foreigners' repatriations rose to $53.58 billion in FY26, while overseas FDI by Indian companies increased to $33.29 billion.
• The Reserve Bank of India (RBI) intervened in the forex market, selling $195.38 billion of foreign currency on a gross basis in FY26.

Detailed Insights:

• The low net FDI inflows have contributed to pressure on the rupee's exchange rate, which neared 97 per dollar before appreciating to 95.69 due to RBI intervention.
• Net FDI is calculated by adjusting gross FDI for repatriated investments by foreign companies and overseas investments by Indian firms, impacting the overall balance of payments.
• The RBI's intervention in March involved gross forex sales of $29.6 billion, the highest in 13 months, even as net FDI was positive for the second consecutive month.
• A trade deal between India and the US in February led to a surge in gross FDI inflows, reversing global investor sentiment by eliminating a 25% tariff.

Key Concepts Involved:

• Foreign Direct Investment (FDI): Investment made by a firm or individual in one country into business interests located in another country.
• Repatriation: The process of returning assets, profits, or capital to the home country of a foreign investor.
• Forex Intervention: Action taken by a central bank to influence the exchange rate of its currency.